THE Financial Intelligence Centre (FIC) has revealed that in 2020, a government entity awarded three contracts amounting to over US$30 million to an individual and two companies which presented falsified documents to show that they were qualified when in fact not.
And the FIC says in the same year, two Prominent Influential Persons (PIPs) holding positions in public institutions and political parties realised K160 million from illegal mining activities.
The two case studies are contained in the FIC 2020 Typology Report which also shows that in 2020, the country lost about K3.1 billion through corruption, tax evasion, fraud, illegal mining and other vices, with corruption alone accounting for over K2.2 billion.
In the first case study, FIC reported that an individual, Company A and Company B presented forged audited financial statements and falsified documents pertaining to their experience and technical capabilities among other illegalities.
“Case 1: Suspected Procurement Corruption. The FIC analysed an STR bordering on suspected corruption and money laundering against an individual DZ, PIPs, Company A and Company B. The suspicions pertained to the awarding of three public contracts in excess of USD 30 million to individual DZ, Company A and Company B. The analysis revealed the following: 1. (a) The bid criterion required the bidders to have a 3 year average turnover which is at least three (3) times the total value of the bid. Bidders were required to submit a copy of their bank statements as evidence of their turnover. It was noted that individual DZ, Company A and Company B failed to meet these requirement. 2. (b) The bid criterion further required audited financial statements for the past three (3) years. Individual DZ, Company A and Company B failed to meet this requirement. Further, Individual DZ and Company A presented forged audited financial statements,” read the report.
“(c) Individual DZ, Company A and Company B, falsified documents pertaining to their experience and technical capabilities. (d) The ill-gotten funds were invested in real estate and hospitality industry. Despite the cited irregularities, individual DZ, Company A and Company B, were awarded the contracts. The analysis revealed influence peddling by PIPs and suspected abuse of office by using strategically appointed officials. The analysis in the case above shows methods and techniques that perpetrators of corruption employ to launder ill-gotten proceeds.”
And according to the second case study, two PIPs engaged in illegal mining activities and later invested in fixed term deposits liquor store businesses to launder over K160 million which they realised.
“Case 2: Suspected corruption, theft and money laundering. The FIC analysed STRs on suspected illegal mining and trade in precious metals involving Individuals ZZ and Individuals QQ. Individuals ZZ and QQ are prominent influential persons (PIPs) holding positions in public institutions and political parties respectively. Members of the local community were induced to illegally mine precious metals by individuals ZZ and QQ. Individuals ZZ together with individuals QQ would transport the illegally mined precious metals either by public transport or through use of private vehicles. The precious metals were sold domestically to Zambians and foreign nationals. Analysis by the FIC further revealed that over ZMW 160 Million was realized. It was observed that the subjects acquired property which included land, buildings, motor vehicles and houses,” read the report.
“The analysis further showed that some of the proceeds were invested in fixed term deposits and in liquor store businesses. Some subjects incorporated companies and opened company accounts in which large cash deposits and withdrawals were made by either the subjects or third parties. Further analysis showed that there were some transfers made using money value transfer services (MVTS) platforms. The case above shows how perpetrators of corruption use corporate vehicles and formal financial services to launder ill-gotten proceeds.”
Meanwhile, according to a case study on tax evasion, a cross border trader declared an annual income of K70,000 when opening an account but within a year, his accounts had a credit turnover of K199 million.
The cross border trader, according to the case study, was using a personal account to conduct business and would send funds to an Asian country.
“Case 1: Suspected tax evasion. This is a case in which the subject who is a cross border trader, declared an annual income of over ZMW 70,000 at account opening. The subject had a number of accounts which were receiving huge cash deposits. Within a period of one year, his accounts had a credit turnover of more than ZMW 199 million. The funds were utilized through outward transfers mostly to an Asian country. It was noted that the subject was using his personal accounts to conduct business transactions and had no registered business. The analysis presented shows that the subject was evading tax,” read the report.
The FIC also highlighted another tax evasion case in which some individuals were sending money to Asia after using personal accounts to conduct business in Zambia.
“Case 2: Suspected tax evasion. The FIC analysed an STR on suspected tax evasion on Individual F, an employee of Company Y, on suspicions that individual F was using their personal accounts to conduct business transactions. Analysis revealed that: (i) Individual F was a director/ shareholder of Company H despite being on a work permit. (ii) Individual F declared a monthly income of over ZMW7,800 at account opening. (iii) Individual F’s accounts had credit turnovers in excess of ZMW 19.82 million and USD 4 million in the period under review. (iv)Individual F received USD 125,000 and ZMW 500,000 from Company H during the period under review. (v) Company H had credit turnovers of USD 2 million and ZMW 6 million in the period under review,” read the report.
“(vi)Company H was not compliant for tax purposes. (vii) There were no salary credits into any of Individual F accounts from company Y, her purported employer. viii) Individual F made transfers of over USD 2 million and ZMW 3 million from her personal account to various companies in Asia to purchase goods. (ix) Individual F was using their personal accounts to conduct business transactions on behalf of their company. The analysis in the case above shows methods and techniques of tax evasion.”
The report indicated that the value of disseminated intelligence reports in 2020 increased to ZMW 3.1 billion compared to ZMW 984 million in 2019.
It was reported that 24 cases of tax evasion were disseminated to law enforcement agencies in 2020 valued at K717 million compared to K144 million in 2019.
Only 14 corruption cases were analysed and disseminated to Law Enforcement Agencies but valued at a whooping K2,228,000,000.
According to the FIC, about K165 million was lost to illegal mining in precious stones and metals while Fraud accounted for 26 million from only six cases.